New Delhi: Shares of leading Indian tobacco companies fell sharply on Thursday after New Delhi unveiled a new excise duty on cigarettes that is set to make products significantly more expensive for consumers.
The Union Finance Ministry late on Wednesday notified an excise duty ranging from Rs 2,050 to Rs 8,500 per 1,000 cigarettes, depending on the length of the sticks, that will take effect on February 1, reported Reuters. The move, aimed at addressing smoking-related health concerns and resource strains, comes in addition to the existing 40 % Goods and Services Tax and follows Parliament’s approval of the Central Excise (Amendment) Bill 2025, which replaces a temporary levy on tobacco products.
The announcement rattled markets, with ITC, India’s largest cigarette maker and the producer of brands such as Gold Flake, seeing its shares fall 4.4 %, touching their lowest level since June 2024, according to the Reuters report. Godfrey Phillips India, the distributor of Marlboro in the country, saw its stock drop 7.7 %. ITC became the biggest loser on the benchmark Nifty 50 index while the broader FMCG segment also declined.
Analysts at ICICI Securities, as quoted by Reuters, estimated that the duty would translate into a 22 %–28 % increase in overall costs for cigarettes in the 75–85 mm category. They added that longer cigarettes, which account for about 16 % of ITC’s volume, could see price hikes of Rs 2–3 per stick. While the government hasn’t stated how retail prices will change, many expect producers to pass on at least part of the added cost to consumers.
With more than 100 million smokers nationwide, the higher tax burden marks a significant policy shift in India’s efforts to curb tobacco consumption, reinforcing previous health-oriented measures such as larger warning labels and periodic tax adjustments.
